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Distributor Directions: A frank approach to distribution

Founder and managing director of The IPL Group, Stead Denton, is one of Australia’s veteran channel personalities. Five months after selling its Oki distribution business to the vendor, his 27 year-old company is now working on building out its unified communications business and market presence. Denton caught up with NADIA CAMERON to discuss dealer trends and his acquisition aspirations.

Vendors

How do you see the market at the moment?
Stead Denton (SD): We are certainly seeing some activity. We go into the enterprise space because some of our dealers go into that space, but really 90 per cent of our customers are what I’d call ‘smart SMBs’. They might only have 50 staff, but they require the same technology as a multinationals, so they’re the ones we hunt and target. We’re starting to see some activity there. In B2B, I think things are still generally tough. We haven’t gone back to pre-2007 levels, but there is growing activity. I’m not sure if that’s because there was more activity in what we did, or not. I think what the GFC did is focus us all on what we should be doing, rather than what we used to do.

For us, that firstly meant selling the Oki business, because that’s what we used to do and the printer business is mature. The only growth there is incremental and there are more and more players. We looked for growth markets, and while everyone will have different ideas on what those are, we were looking for an area where we had skills. Because of our IP telephony background, we’re seeing emerging opportunities in our sector around unified communications and video – conferencing, CCTV – all connected to the telephony platform. About two years ago, during the start of the GFC, we focused on being good at that and we’re now deriving the benefits. For example, we picked up LifeSize, which was subsequently purchased by Logitech, and which signed an OEM agreement with Avaya taking them into the enterprise space. We’ve got another serious deal coming shortly, which will be a game changer.

Is it better to be a traditionalist or an innovator today?
SD: It depends on where you are in the market. Ingram Micro, who is a traditionalist, would find it difficult to be an innovator because of its skill set. If we tried to compete with Ingram on time and place, we’d get beaten everyday. Our job as a value-added distributor is to find the next wave. If we’re not in front of it, then the margins aren’t there. So by definition, we have to be more innovative than a traditional distributor.

IPL has undergone significant change as a result of the sale to Oki in December. How is the new business model tracking so far?
SD: For us, it hasn’t been that different. When we sold the Oki business, we’d had a 27-year relationship with those guys, they had an equity stake and were on my board, so people have moved across and that has changed. But they’re renting space in my warehouse, and they still come back to us for information. If there was a big difference, it was that we took on Panasonic. That’s a much more hectic business as it’s a lot more boxes at lower cost. The reason we were attracted to Panasonic was to help move it up the value chain and into the application software business. The old TDM system was about a phone, but in IP it’s all server-based and the only benefit of being on a server is if you have software applications. We have been working with Panasonic’s factory to bring it up to the big guys’ level and we’re about to move forward with that. With printers, we ended up being the wrong shape and colour, because it’s a time-and-place business and we had to sell something that needed value-add.

Has Panasonic seen you make new investments into skills and staff?
SD: We probably brought more skills to Panasonic actually. We have been selling Alcatel, Avaya and Siemens since 2000. That’s why Panasonic came to us – we brought that to the table.

The networking market is undergoing substantial consolidation and change. How are you dealing with that as a distributor?
SD: It’s a moving target. Particularly with Avaya and Nortel, or HP and 3Com, how do you maintain your channels without conflict? The life of a distributor is not an easy one. With vendors, the better the job you do, the more distributors they’ll bring on. And you can build a business with them, but they’ll decide they want to do in a different direction. You have to be nimble.

Given you have Siemens, Alcatel and Panasonic in your IP telephony line-up, is there room for more?
SD: No. That gives us about 300 dealers with various degrees of skill and accreditation. We have eight engineers who do nothing but support those guys. And our investment in all three is too great for us to walk away, and we have a massive installed base of each. I have been approached three times in the last 12 months by vendors looking for us to take on their products, and I’ve said no. I think all the telephony vendors understand now that the game is no longer hardware, it’s in software.

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